Nasdaq
华尔街日报Quantum software S.A. (WSE:QNT) Stock Rockets 33% But Many Are Still Ignoring The Company
Despite an already strong run, Quantum software S.A. (WSE:QNT) shares have been powering on, with a gain of 33% in the last thirty days. The last month tops off a massive increase of 104% in the last year.
In spite of the firm bounce in price, given about half the companies in Poland have price-to-earnings ratios (or "P/E's") above 13x, you may still consider Quantum software as an attractive investment with its 8.6x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.
With earnings growth that's exceedingly strong of late, Quantum software has been doing very well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.
See our latest analysis for Quantum software
What Are Growth Metrics Telling Us About The Low P/E?
There's an inherent assumption that a company should underperform the market for P/E ratios like Quantum software's to be considered reasonable.
Taking a look back first, we see that the company grew earnings per share by an impressive 148% last year. The latest three year period has also seen an excellent 376% overall rise in EPS, aided by its short-term performance. Therefore, it's fair to say the earnings growth recently has been superb for the company.
Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 18% shows it's noticeably more attractive on an annualised basis.
With this information, we find it odd that Quantum software is trading at a P/E lower than the market. It looks like most investors are not convinced the company can maintain its recent growth rates.
What We Can Learn From Quantum software's P/E?
The latest share price surge wasn't enough to lift Quantum software's P/E close to the market median. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
We've established that Quantum software currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low if recent medium-term earnings trends continue, but investors seem to think future earnings could see a lot of volatility.
Before you take the next step, you should know about the 5 warning signs for Quantum software (2 make us uncomfortable!) that we have uncovered.
Of course, you might also be able to find a better stock than Quantum software. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.